MSCI adopts index exclusion rules that could oust Strategy

MSCI adopted a methodology that makes “non-operating companies” ineligible for its Global Investable Market Indexes. The change matters because several companies mainly associated with holding crypto assets could lose their index positions. Removal can affect funds that automatically follow these indexes and may reduce demand for the companies’ shares.

MSCI will examine operating assets and five financial ratios. A company failing at least four of the five tests could be considered ineligible. Strategy was previously identified for deletion. Metaplanet and Upexi were also identified for deletion, while several others face watchlist review.

Existing index members generally must fail the screening process over two annual reporting periods before removal. MSCI will publish the final removal list on November 11, with changes taking effect November 30, 2026. The article does not identify the exact thresholds for each financial test.

Strategy, Metaplanet and Upexi were previously identified for deletion under MSCI’s non-operating companies methodology. Their possible removal reflects the new rule for companies judged ineligible for MSCI Global Investable Market Indexes. The decision matters because index-tracking funds may need to adjust their holdings.

Sharplink, Inc., listed as SBET, is on a watchlist. Ton Strategy Company, listed as TONX, Solana Company, listed as HSDT, and DeFi Development Corp., listed as DFDV, are also being watched for potential removal. A watchlist review does not itself confirm deletion.

MSCI will release the final list of companies to be removed on November 11. The changes are scheduled to take effect on November 30, 2026. Existing companies generally must fail the screening process over two annual reporting periods before removal, adding a condition beyond the initial assessment.

An MSCI Global Investable Market Index is a benchmark of companies that investors can generally buy and sell. It is designed to represent investable stocks across markets and company sizes. Indexes help funds build portfolios that follow a defined market segment rather than selecting every holding independently.

For this article’s rule, MSCI screens companies for operating assets and five financial ratios. A company that fails at least four tests could be deemed ineligible as a non-operating company. Strategy was identified for deletion under this methodology, while other crypto treasury companies face possible review.

MSCI’s broader inclusion process also considers factors such as market size, trading availability, liquidity and foreign-investor access; these details are established MSCI index principles but are not explained in the article. Existing members generally must fail the screening over two annual reporting periods before removal.

JPMorgan analysts previously estimated that Strategy’s exclusion could trigger roughly $2.8 billion in selling. That figure is the article’s largest estimate of the potential market impact. It came from MSCI’s earlier digital asset proposal, not the rules adopted Thursday, so it should not be treated as a final forecast.

Strategy gave a smaller measure of the immediate holding base. Funds tracking MSCI’s Global Investable Market Indexes held approximately 13 million Strategy shares. Those shares represented 3.1% of Strategy’s basic shares outstanding, according to the company.

Strategy said those holdings amounted to less than one day’s trading volume. That comparison suggests the company viewed the forced selling as manageable in normal trading terms. Still, MSCI’s final list and the actual fund responses will determine how much selling occurs after any removal.

If Strategy leaves MSCI indexes, funds designed to track those benchmarks may have to sell its shares. That selling could place downward pressure on the share price. Exclusion could also reduce passive investment demand because the stock would no longer be included automatically through those index-tracking portfolios.

The article describes the effect as a loss of access to default portfolios. Conner Brown of the Bitcoin Policy Institute said exclusion removes a company from the default portfolios of tens of millions of people who never chose to remove it. The mechanism is automatic: funds mirror index membership and adjust when the benchmark changes.

The size of the effect remains uncertain. JPMorgan analysts previously estimated roughly $2.8 billion in selling, based on an earlier proposal. Strategy said MSCI-tracking funds held about 13 million shares, equal to 3.1% of basic shares and less than one day’s trading volume.

MSCI’s new methodology asks whether a company is operating enough to remain eligible for its Global Investable Market Indexes. The article does not provide a single definition based only on crypto holdings. Instead, MSCI combines an assessment of operating assets with five financial tests.

A company that fails at least four of the five financial tests could be deemed ineligible. Operating assets are therefore part of the screening framework, alongside the ratios. Strategy was previously identified for deletion, while Sharplink, Ton Strategy Company, Solana Company and DeFi Development Corp. were placed on a potential-removal watchlist.

The timing rule adds another safeguard for companies already in the indexes. Existing members must generally fail the screening process over two annual reporting periods before removal. MSCI will publish the final deletion list on November 11, and the changes will take effect November 30, 2026. Exact ratio thresholds are not provided.

Passive investing is an approach in which a fund seeks to track a benchmark rather than have managers frequently choose individual stocks. An index fund holds securities included in its target index. Its goal is to reflect the index’s composition and performance as closely as possible.

When an index adds or removes a company, the fund typically adjusts its holdings to keep matching that benchmark. If MSCI removes Strategy, funds tracking the relevant indexes may sell Strategy shares. This is why index changes can create buying or selling demand even when individual investors have not made a personal decision.

The article says exclusion could force tracking funds to sell affected shares, potentially pressuring prices and reducing passive demand. Strategy said MSCI-tracking funds held about 13 million shares, or 3.1% of its basic shares outstanding. The article does not state exactly how every fund would implement a change.